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Closing Comments



Closing Comments


Exporters sold 23.5 million bushels of corn in the week ending January 1, the typical slow time between Christmas and New Year’s Day. The total included 15.3 million old-crop bushels, which was down from 35.2 million the previous week, but up from the five-year average for the week of 9.6 million bushels.

Marketing year sales total 1.076 billion bushels, down 32 million or 3% from the previous year. Exporters typically sell 56% of final corn shipments by the first of January, whereas they had sold 58% by this point last year. However, exporters have already sold 62% of USDA’s target for the current year that ends August 31. As such, corn export sales to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 104 million bushels, versus 101 million the previous week.

Exporters sold 7.2 million bushels of grain sorghum in the week ending January 1, matching the previous week’s pace and up from the five-year average for the week of 0.7 million bushels. Once again, sales to China accounted for the bulk of the total.

Marketing year sales total 238 million bushels of grain sorghum, up 129 million or 120% from the previous year as Chinese end users quietly empty our shelves. Exporters typically sell 49% of final grain sorghum shipments by the first of January, whereas they had sold 51% by this point last year. However, this year they have already sold 103% of USDA’s target for the year ending August 31. As such, sales to date exceed the seasonal pace needed to hit USDA’s target by 126 million bushels, up from 120 million the previous week.

Farm Futures’ magazine survey of 1,650 producers revealed intentions to plant 88.51 million acres of corn this coming spring, down from 90.9 million in 2014. That is a fluid number, as the market has been shifting the soybean/corn price ratio more toward corn in recent months. That trend will likely continue, but in the meantime it leaves corn a bit less susceptible to collapse than soybean prices if South American continues to see favorable weather. However, it’s not sufficient to prevent corn from going lower if soybeans break sharply.

Traders were reluctant to push corn prices higher amid bearish chart signals, index fund rebalancing, weaker soybean prices and favorable yield prospects in South America. There is a modest bullish leaning ahead of Monday’s crop report, but uncertainty in the trade ahead of the January report’s release is probably the highest that it has been in many years. Monday will be a reset day for USDA.


Exporters sold 33.5 million bushels of soybeans in the week ending January 1, up from 22.5 million the previous week and above the five-year average for the week of 15.6 million as sales generally slump during the holiday period. Marketing year sales total 1.587 billion bushels, up 90 million or 6% from the previous year.

Exporters typically sell 73% of final soybean shipments by the first of January, whereas they had sold 91% by this point last year. This year’s sales to date equal 90% of USDA’s target for the year. As such, sales to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 307 million bushels, up from 297 million the previous week, but that gap is expected to narrow significantly as we move into February and beyond.

Another key to soybean fundamentals that provided the primary boost for prices this past fall is soymeal. Export demand for soymeal exploded higher after Argentina defaulted at the end of July and slow producer sales at harvest made it difficult to service those orders. Shipments on those orders remained strong in the week ending January 1 at 216.2K metric tons, but new sales were slow at just 37.3K tons.

Malaysian palm oil prices pushed to new six-month highs on production losses due to excessive monsoon rains. Flooding rains are expected to cut production by 20% or more. As a result, we’re seeing speculation that soyoil demand will rise. Export sales of soyoil for the week ending January 1 were good at 30.2K metric tons, which was nearly triple the typical rate for this time of year. However, soymeal remains the primary driver for soybeans at this point.

Farm Futures’ reader survey revealed intentions to plant 88.3 million acres of soybeans this coming spring, up from 84.2 million in 2014. That may change before we get through spring planting, but it certainly hangs over this market like a bearish cloud if we follow a big South American crop with a 5% increase in U.S. acres in 2015.

The prospect of larger supplies weighed on the soybean market today. Soyoil got the good end of the product spread trade today, with soyoil benefiting from tighter palm oil supplies and soymeal supplies expected to grow. However, the oilseed complex looks weak if we don’t see a big bullish surprise on Monday from USDA or a sudden shift to drought concerns in South America.


Exporters sold just 8.3 million bushels of wheat in the week ending January 1, including just 5.5 million old-crop bushels. The old-crop sales were down from 13.0 million bushels sold the previous week and were down from the five-year average for the holiday week of 8.9 million bushels. Marketing year sales total 685 million bushels, down 217 million or 24% from the previous year. Sales to date exceed the seasonal pace needed to hit USDA’s target by May 31 by 7 million bushels, unchanged from the previous week.

It was buy the rumor and sell the fact in the wheat pits. Bitter Arctic air is believed to have done damage to scattered areas of 30% of the Midwest soft red winter wheat belt overnight, with more damage possible Friday morning. An unexpected outbreak of sub-zero readings is also believed to have done some damage in the central quarter of Ukraine’s belt.

The Midwest damage threat is legitimate, following possible damage in the Plains hard red winter wheat belt the previous week, particularly following a sharp drop in crop ratings reported in Kansas and Illinois on Monday. However, we won’t know the scope of any possible damage until late February or March, making it difficult to keep traders focused on the problem in early January.

Egypt bought 6.6 million bushels of French wheat in its latest tender today. France obviously has a freight advantage, but the weak euro and strong dollar gave it another advantage as well. U.S. wheat is simply too expensive on the global market. That reality returned to the front burner today, producing double-digit losses.


Live cattle futures tried to push higher early today on the strength of cash cattle and boxed beef markets, but fear over index fund portfolio rebalancing provided a lid. The index funds are expected to sell more than 14,000 live cattle futures contracts as they rebalance their portfolios.

Boxed beef movement was strong at 218 loads on Wednesday, up from 180 loads the previous day and up from 163 loads the previous week. Choice cuts were up $2.42 to $252.75 per cwt, while Select cuts were up $2.07 to $242.12. That lifted the Choice/Select spread to $10.63 per cwt, up from $10.28 the previous day and up from $10.33 the previous week. Movement at mid-morning today was routine at 82 loads, but at strong prices once again. Choice cuts were up another $2.26, while Select cuts were up $3.34 per cwt.

Feeder cattle futures saw a bit more strength, showing less fear of index fund rebalancing and more respect for the cash market. The latest CME cash index came in at $233.53 per cwt, up $1.43 and up $19.07 over the past six trading days.

Wednesday’s kill was estimated at 104K head, up 13K from the previous week, but down 12K from the previous year. Kill for the first three days of the week is estimated at 322K head, up 2K from the previous week, but down 13K from the same week last year. This week’s kill is expected to come in below 550K, down a bit from earlier expectations as one major packer slows hours. Trade took place in the negotiated market early this week as packers battle for limited supplies to get their upfront needs met, with most feedyards said to be current after the sales.

November beef exports dropped to 201.1 million pounds, down from 227.4 million the previous month and down from 216.3 million the previous year. The strong dollar made it increasingly difficult for U.S. beef to compete in November, especially amid record high prices being paid to producers here. Shipments to South Korea increased over the past year, along with shipments to Japan. However, beef exports in November were down from the previous year for Mexico, Hong Kong, and Canada.

Index fund portfolio rebalancing, both the fear of it as well as the actual selling, weighted on live cattle futures today. Nobody wanted to stand in front of that train even with the cash market trading more than $10 above the futures market. Live cattle futures traded the $3 daily limit lower, while some feeder cattle contracts reached the $4.50 daily limit lower. More index fund rebalancing should be seen over the next four days.


Both the cash and product markets shows some signs of stability today, but futures remained under pressure as they tried to catch up with recent weakness. Midwest cash hogs were mostly steady amid bitter cold slowing hog movement. However, the Illinois market was steady to $1 lower.

Product movement was strong on Wednesday at 585 loads, up from 465 loads the previous day and up from 461 loads the previous week. The composite pork product price was up $0.12 to $82.53 per cwt. Movement at midday today was decent at 206 loads, but not impressive at all. Prices remained stable, with the composite price coming in at $82.69 per cwt, up $0.16 on the day.

Wednesday’s slaughter was estimated at 418K head, up from 373K the previous week , but down 10K from the same day last year. Estimated slaughter for the week to date came to 1.267 million head, up 24K from the previous week and up 154K from the same week last year.

November pork exports totaled 364 million pounds, down from 383.5 million the previous month and down sharply from 453.6 million the previous year. Like beef, U.S. pork prices battled a significant handicap with the dollar trading sharply higher. Exports to South Korea were up over the previous year, but shipments to China were only about a fourth of the pace seen one year earlier.

The late-day collapse in the beef market weighed on the pork market as well. However, lean hog futures are trading closer to where the cash market is, leaving it less exposed. Index fund rebalancing was also considered to be less of a concern for hogs, after this fall’s price break. The February lean hog contract probed below support at $78, before bouncing back above it. However, the contract remains above the cash market.

Closing Market Snapshot


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.




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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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